The Arizona Chamber of Commerce and Industry and over 40 other chambers of commerce have hailed Arizona's new economic competitiveness package as a once-in-a-generation opportunity to attract and retain good jobs.
Gov. Jan Brewer, House Speaker Kirk Adams and Senate President Russell Pearce should be applauded for their hard work in getting the bill passed. The measure puts more tools in the state's economic development toolbox as we pull ourselves out of this Great Recession and win back the nearly 300,000 jobs we've lost.
But before we complete our victory lap, it might be worth ticking off what the bill contains and why it's so important to Arizona's future economic health. These are the big ticket items that businesses pay attention to when they decide whether to make or increase an investment in our state.
Phases down the corporate income tax rate from nearly 7 percent to less than 5 percent over four years beginning in 2014. By 2017, Arizona, which now has the sixth highest corporate income tax rate in a nine-state Western region, will be in a more competitive position with this 30 percent cut when we shoot to the second lowest rate both regionally and nationally among states that impose a tax on corporate profits.
Phases down the commercial and industrial property assessment ratio from 20 percent to 18 percent over four years beginning in 2013. Arizona is uncompetitive right now in the commercial property tax arena. We rank 41st nationally and eighth in the nine-state Western region. But the competitiveness package passed by the Legislature and signed by the governor makes a significant improvement and continues us down the path of putting business property taxes on the same footing as residential property taxes.
Phases in a 100 percent elective sales factor. Arizona's tax code currently penalizes companies that manufacture items here and sell them outside the state's borders. A corporation's Arizona income tax liability is determined by a formula that considers the company's sales presence, payroll presence and property presence. So a company that has, for example, a large manufacturing presence here but doesn't sell much in the state still could face a hefty tax liability. But throughout the country, states are attracting investment by allowing companies to eliminate their payroll and property presence in that state when calculating their tax liability and instead factor in only their sales presence in the state. The new bill means that companies that expand physical operations or hire additional workers in Arizona will no longer be hit with a higher income tax liability.
Establishes a Quality Jobs Program, with corporate tax credits of up to $9,000 for each qualifying new job. The Quality Jobs Program provides a $3,000 tax credit, which can be claimed for up to three years, for qualifying new jobs. To qualify, the new job must: 1) be full-time, 2) pay at least the median wage, and 3) pick up at least 65 percent of the premium for the employee's health insurance.
Funds the Arizona Commerce Authority and a deal-closing fund. The Commerce Authority will now be the lead agency for the state's economic development efforts, replacing the Department of Commerce, which for too long could have been called the Department of Musical Chairs as political appointees cycled in and out of the department. The ACA adds a level of accountability and professionalism to our business recruitment efforts that we've been lacking.
There's more to be excited about. An increase in tax credits to angel investors, the elimination of capital gains on small business investments, an increase in the university-related research and development tax credit and an increase in business personal property depreciation are all elements of a state that's now more fertile for job growth.
The governor and the Legislature could have sat on their hands and waited and hoped for our economy to improve. Thankfully, they did not.
This bill is just what the doctor ordered to set Arizona's economy on the road to recovery. Because of this legislation, Arizona has announced to the rest of the world that we're open for business and ready to compete on a regional, national and global basis.
Glenn Hamer is the president and CEO of the Arizona Chamber of Commerce and Industry.